ABSTRACT
A unit trust is a form of ‘collective investment scheme’ as defined by the EU UCITS (undertakings for collective investment in transferable securities) Directive and s 235 of the Financial Services and Markets Act 2000. The term ‘collective investment scheme’ is a catch-all designed by European legislation to encompass a range of entities which resemble the US mutual fund in which groups of investors (or ‘participants’) contribute to the fund and take rights in that fund in proportion to their contribution. In short, a collective investment scheme is a pool of investment capital provided by participants so that each participant receives a share of the profits generated by those mutual investments in proportion to the size of her contribution. The two forms of collective investment schemes permitted under English law are the unit trust (which is, in essence, a trust structure) and the openended investment company (which is an incorporated company empowered to buy back its own share capital as part of its commercial activities). This chapter will focus on the nature of the unit trust, but will also draw parallels with the openended investment company (or ‘oeic’) where appropriate.
